Australia’s Budget “Made In China”

A looming budget announcement in Australia highlights Canberra’s dependence on raw material exports to China for revenue, according to Reuters: Australia’s minority government will hand down its first budget next Tuesday, with revenues hit by natural disasters and a high Australian dollar and little room to spend on populist policies to buy back falling support. What revenues it does have to spend are heavily dependent on China’s insatiable demand for its natural resources …. Though the economy is in its 20th year of expansion and with a booming resource sector and huge Chinese demand, Treasurer Wayne Swan has promised a tough budget, with a tight rein on spending to ease mounting inflationary pressures and achieve a promised 2012-13 surplus. Australia’s deficit and debt is small by international comparisons, but its political parties are obsessed with achieving and maintaining a surplus, aware that voters see failure to do so as economic mismanagement. Australia was the only advanced nation to avoid recession during the global financial crisis, thanks in large part to exports of resources to China …. “The budget comes with a ‘made in China’ stamp these days,” said Deloitte Access economist Chris Richardson. “If China, and hence commodity prices, stumble, then the budget will take a battering.” Prime Minister Julia Gillard visited China last month. The Sydney Morning Herald summed up her “dance with the dragon”: It could have got a bit nasty, given the pressures on Julia Gillard to put her stamp on foreign policy and her inexperience in the field, but the Prime Minister’s visit to Beijing has shown both sides determined to make the best of the fast-expanding relationship between Australia and China. Gillard has essentially returned Canberra’s handling of the relationship to the patient, pragmatic and optimistic approach that her predecessors have found to be the ...
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